KEYSTONE EDITORIAL: Pa. has a $50 billion problem

Editor’s note: This is the ninth in a yearlong series of occasional editorials from the editorial board of Digital First Media newspapers in Pennsylvania focusing on the crucial “Keystone” issues of education and property taxes.

Pennsylvania has a $50 billion problem.

The state’s unfunded liability in its two major public pension systems, those that cover government employees as well as public school teachers, is an economic nightmare. It’s been a ticking time bomb for more than a decade. Now it’s about to explode, wreaking havoc on school budgets across the commonwealth and leaving school districts – and, in turn, property owners – holding the bill.

Gov. Tom Corbett, who has referred to the pension problem as a “tapeworm” in the budget process, has decided to draw a line in the sand and force the Legislature’s hand in dealing with what he calls the state’s “No. 1 economic issue.”

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The governor has spent the last couple of weeks crisscrossing the state pushing the issue, and tying it to another economic albatross, skyrocketing property taxes.

This comes after he went eyeball to eyeball with the Legislature — including his Republican brethren — in a budget standoff in which he threatened to veto a no-tax-hike fiscal plan unless the pension issue was addressed. Our elected representatives yawned and headed home for the summer. Backed into a corner, Corbett relented and signed the spending plan, but not before sticking his pen in the eye of the Legislature by slashing more than $72 million for their operations and pet projects.

He’s demanding they come back to Harrisburg to do battle over the pension.

His opponents see politics behind the governor’s concern. With his poll numbers in the toilet, he faces a decidedly uphill battle vs. Democrat Tom Wolf. They see a drowning man struggling to reach a life raft, in this case pension reform. And they wonder why a governor whose party controls both the Senate and House has so much trouble getting anything done.

Give Corbett credit for a couple of things. First, while he certainly has upped the ante in recent weeks, he’s been sounding this alarm since taking office nearly four years ago. This isn’t something he just discovered. Plus, he’s managed to deliver the state’s portion of the pension funding each year, something his predecessors did not always do

The governor was in Delaware County Thursday afternoon, telling residents he knows why their property taxes are skyrocketing, forcing some senior citizens and those on fixed incomes out of their longtime homes.

He pointed out that pension costs in Delaware County have increased by more than $51 million, a cool 324 percent, in the past 10 years. Not surprisingly, this year 13 of 15 school districts raised taxes.

His opponents chirp that the governor conveniently forgets the austere budgets in his first two years, including cuts that many believe forced local school boards’ hands in hiking taxes.

No one is arguing that pensions are not a ticking time bomb, but no one yet has a way to defuse it.

As a start, Corbett is pushing for a hybrid proposal offered by Rep. Mike Tobash, R-125, of Pottsville. It would attempt to tame future shortfalls by putting new state employees in a plan that would deliver defined benefits until a worker reaches $50,000 in salary. At that threshold, workers would then be eligible for the kind of 401K play most private sector workers have.

Even Corbett admits it’s no silver bullet, but rather a starting point. The real problem with the plan is that is does nothing to attack that $50 billion sea of red ink, one that Corbett indicates is likely to swell by $600 million each year.

The folks at the Pew Charitable Trust have looked at this problem extensively, including working with several states facing similar problems.

First and foremost, the stress the state must pay its bills. They’re right. The $50 billion is not going to go away. Second, they suggest a task force to examine the crisis and come up with a solution.

Corbett has indicated he would support such a plan.

By all means, the Legislature should take aim at future problems by adjusting the defined benefit plan in favor of defined contributions.

We urge them to quickly set up a task force, much like the one that led to real results on transportation funding. Ironically, a similar panel this week got down to work on the issue of a new education funding formula.

All that’s at stake is the economic future of the commonwealth. And the education of our children. High stakes indeed.